Example Answers to Questions on LVMH

Example Answers to Questions on LVMH LVMH is known as global giant who is famous for its luxury product. The company is based in Paris France, with strength of more than fifty six thousand employees from all parts of the world, the total number of employees include just the 33 percent from France. The foundation of company was laid down with 50 luxury brands in the year 1987, now the organisation is decentralized and they are grown and passing through different stages of organisation evaluation and achieving different landmarks in their business. All the main offices and head quarter of the company is at the capital city of France, but the organisation can be called as multi culture because they include persons in the higher management and staff from different backgrounds, cultures and countries. Structure and Operations of LVMH LVMH is a group of fifty different companies who have about 450 subsidiaries in different locations round the globe; every company has its own way of doing their business with their president and the process through which they have set up that which subsidiary will report to whom. The management of LVMH has divided different business operations into five zones globally; following are the five zones of LVMH business France America Europe Asia Pacific and Japan To achieve the business standards and improved organisational quality the LVMH uses different approaches at different business zones, but the most common and most widely used is international mobility, they believe in international mobility of their higher management and skilled staff, which include vertical and horizontal moves within the organisation and geographical placement at different business locations and business zones. Working with different cultural environments is very necessary for global organisations like LVMH, they need to develop their employees skills and competencies to smoothly operate in multi cultural environment, but lucky most of their expatriates are internationally experienced so this is not to difficult task for the higher management of LVMH to work in multi cultural environment. But they do provide pre departure and post arrival training to all of their expatriates and international mobile staff about the cultural values and other necessary information which they have to deal with during their stay in the country. Introduction to Task 1 Indentify three key HRM activities in LVMH and discuss how they fit into overall corporate objectives of the company. Argue which model of HRM LVMH deploys and why? Identification of HRM Activities The three key HRM activities which I have identified from the LVMH case study are following Recruitment and Selection Career development and International Mobility (T D) Employees Appraisal System Recruitment and Selection (R S) As LVMH is a global giant with global operation, it is necessary for LVMH to have talented staff to retain their global position as giant and provide their customers good services in order to have a good name for the organisation. At start LVMH human resource department was sometime lacking in international experience, competing in a global environment, so LVMH decide to attract, develop and retain managers with global experience (by 2001 it had 260 expatriates and 650 other employees working in a country not their own) To achieve the corporate goals LVMH is following a very comprehensive and realistic approach i.e. the LVMH subsidiaries HR directors coordinate with the business groups through monthly meetings, in order to identify the vacant positions throughout the world and also study the list of potential candidates within organisation who has potential to progress through new assignment within the year. After that vacant positions are announced on the company website, so anyone can apply for that position worldwide, so LVMH attract professionals from all over the world not just for economic benefits but through exciting career development opportunities, which help LVMH is getting professionals from all over the world and achieve their corporate goals. Career Development and International Mobility (T D) From its creation LVMH is an international organisation, and to meet the needs of an international organisation, they were lacking in their human resources and their international management skills. E.g. in 1987 too many mangers were not fluent in English so the management sought to create a team of managers with working knowledge of international market. To have a professionally trained international class team it is important to have plans for career development of employees. At LVMH they dont focus too much on formal trainings but instead of that they prefer Mobility, mobility like vertical, horizontal and geographical moves in organisation, In order to polish their skills and get experienced in an international environment, like once a French insurance specialist in the fashion business unit was sent to Romania to head a shoe factory. To have an international business specialist management team LVMH focuses on international mobility instead of expatriation, because a person sent from UK to France is more likely to return and work in UK with good experience got their in France. The international mobility policy is a part of career development which requires the training of global mangers on limited time basis. The HR department convince a manager to become internationally mobile by offering them more challenging job with more freedom to perform his task than home. One positive aspect of LVMH international mobility is to take risk in order to develop high potentials. LVMH has two type of high potentials HP1 and HP2, an HP1 is an individual going to have top management position (like board of director) while HP2 is an employee go a step or higher in management hierarchy. Employees Appraisal System Appraisals done properly are an honest attempt to appraise someones current performance (i.e. behaviour) and to help them identify how to improve. (Honey, Peter Improve your people skills, second edition, 09) Appraisal is required to recognize ones work and get your employees motivated and stick on to the organisational goals. Most of the organisations have a systematic way of appraisal like once in year, after accomplishment of a task. At LVMH performance appraisal system is not only based on results but also to propose and implement new ideas. A very good approach to appraise someone is to appraise ones ideas, because it is not necessary that the top level management can just produce good ideas, newly employed young and energetic people can produce ideas which may be not based on experience, but through the latest and updated knowledge and resources they have (like technology). So LVMH try to achieve their corporate goals and objectives through appraisal system. Which HRM Model LVMH deploys LVMH has deployed the European model of human resource management i.e. Best Fit model. Because in best fit model organisation identify HR strategies that fit their business e.g. market, labour, size and structure of the organisation. Justification of using Best Fit model At LVMH they have different HR activities which clearly state that which model they have deployed in their organisation. If we take the example of International Mobilization the concept behind this is Best Fit as Boxall and Purcell described decisions over selection / recruitment, development and training are strategic in nature and have to be harmonised with corporate strategy. LVMH is working in different countries dealing with different cultural people, as HR activities vary from cultured people, as HR activities vary from cultural to cultural, so using the best fit approach they deal each country / subsidiary in the way which best fit them. At LVMH the HR strategies and business strategies are inter dependent, which is according to definition of (Armstrong, 2003) states that best fit approach is Inter-dependence between HR strategies and business strategies. Introduction to Task 2 The requirement from this task is to provide information on the key approaches that how LVMH manages its employees training and development. What are the strengths and weaknesses of their system and provide recommendations to LVMH board of Directors on how to improve its strategy towards TD of its staff management. Training and Development Training is the process of altering employee behaviour and attitudes in a way that increase the probability of goal attainment [1] or we can define training as the formal and systematic modification of behaviour through learning which occurs as a result of education, instruction, development and planned experience [2]. Development is any learning activity which is directed toward future needs rather than present needs, and which is concerned more with growth than immediate performance [2]. How LVMH ensure their employees T D To ensure their employees skill development and equipped them with latest skills and knowledge of management LVMH has a variety of training and development programs. The main focus of all these activities is on to prepare their employees to meet the high market challenges and to ensure the achievement of their organisational goals and objectives through proper utilization of human resources. Following are the key approaches which LVMH use for their employees training and development. International Mobility Career Management (Organisational Management Review OMR) Inter Cultural training International Mobility At LVMH international mobility is an activity for gaining high career mile stones, and develop manager to take the global management positions and enable them to work at a multi cultural and out of their home countries. International mobility is likely to entail a radical functional move. Through international mobility the managers are put into new situations to help them develop new skills and prove their courage. Through international mobility LVMH try to identify the potential individuals who are ready to go for an international assignment and have capabilities to carry out the duties of expatriates. The company provide so many opportunities to its international mobile staff, it attract mangers to international assignments through exciting career development prospects and not through economic incentives, even though its incentive program is competitive. This is a part of career development, they dont dispatch expatriates because of a lack of local talent but they international mobile employees have to fulfil two profiles , one is to those sent by the headquarter to control its subsidiaries and protect its interests and the other is to ensure information, organisational business and to harmonize the procedures. Career Management (Organisational Management Review OMR) To provide their employees an insight into their career development LVMH has a career management process which is known as Organisational and Management Review (OMR). This is an annual process in which the HR objectives of the company are reviewed and set the organisational need for the next three years, that which employees need what sort of trainings and list the potential employees ready for international assignments and to prepare them and train them for the top management position. They use the OMR for maintaining the list of the candidates ready to move and assess their current development. Inter Cultural training To become an internationally mobile or expatriate the employees of LVMH needs intercultural training to adjust quickly, because international position usually has to be filled very quickly, which leaves little time for intercultural training. LVMH normally chose those employees to become internationally mobile / expatriates who has some past experience of international environment. They are extending training to both the employees and his or her family, and for time being both pre departure and post arrival training limited to just language training, which LVMH needs to extend to properly prepare their employees for the position of expatriate. Recommendation for LVMH Board of Directors Keeping in view the above discussion about the training and development in LVMH, I will recommend the board of Directors of LVMH as As LVMH believes in international mobility, and select those employees who has some past international experience, but that is not enough to hold an international management position. So it is recommended to start a structured long term training program to develop a pool of employees for international mobility. When an employee is going to take position as expatriate he / she should be provided enough time to get trained about that country culture, people life style, management styles preferred in that country and the environment of business. LVMH has the opportunity to have proper training and development courses for their support staff and non managerial employees to improve the standard of their daily organisational and business activities. Introduction to Task 3 The requirement from this task is to apply Balance Scorecard to LVMH, and critically review the performance of HR and provide suggestion that how to improve their HR performance. What is Balance Scorecard This system is used by good and large scale organisation for the strategic planning of their business, and is widely used in the business organisation, government institutions and some of the large scale nongovernmental organisations in order to improve the level of their business strategies and align that with their organisation vision, improve the standard of communication in and outside the organisation, and how to monitor their performance keeping in mind the business goals and strategic objectives of the business. Balance Scorecard for LVMH To maintain a balance score card for the LVMH following issues / topic of the HR will be addressed in the balance score card, and the will provide ideas on how to monitor the performance of the HR department. Learning and Growth Perspective Internal Perspective Financial Perspective Learning and Growth Perspective Objectives: Improve the standard of learning of HR staff in making the strategies and deciding the corporate goals, and make them able to be sent on international assignments. Description: Make the HR staff able for international mobility. Corporate Objectives Performance Measures Identification of the candidates who have enough skills, competencies and confidence to become and international mobile officer. Complete the progress and perfromace reports of all employees. Identification of the HR skills of all staff of the HR departments and also for others. Verification and validation of all the HR skills of employees time by time. Actions: Objectives: improve the attachments and dedication of HR staff toward the organizational goals and objectives of the LVMH Description: what are the weaknesses and strengths of the HR department employees, and what activities are needed to improve the skills and competencies of the employees? Corporate Objectives Performance Measures Testing and validation of the HR staff performance and focusing on the weak areas which needs to be improved. Organization special procedures for the maintenance of the employees personal and professional skills record. Actions: Objectives: Modeling and creation of the performance management indicators and improving the standard of communication within the organization. Description: to develop the new systems and those which are already in practice in the industry, or implementation of the standard procedures for the performance management and communication improve the communication. Corporate Objectives Performance Measures Improve the individual alignment and attachment with the strategic plan of the organization by providing them incentives Improve the standards of already implemented communication. Create an implementation plan to model best practices Take the staff on board while deciding all these issues, and take their opinion through survey or some other activity, and make them realize that this for their improvement, and value their feedback. Actions: Internal Perspective Objectives: enhance the employees commitment with organization, and make them proud to be a part of LVMH Description: Satisfy the employees being a part of LVMH, and make them realize that LVMH cares for them. Actions: Corporate Objectives Performance Measures Make the LVMH a good place for work with. Design good strategies for employees involvement and satisfaction. Give attention to employees survey results and feedback. Evaluate the turnover data. Objectives: making the recruitment process effective Description: develop new and enhance the existing recruitment process to make this dream a reality that right person on right place at right time Actions: Corporate Objectives Performance Measures What are the key area of working with LVMH Make the use of technology in recruiting process Integrate good employer story and branding efforts into recruiting Look at the turnover rate How much customers are satisfied with the organization employees. How much management is satisfied with employee performance? How can LVMH improve their HR performance? As LVMH is a global giant doing operation in different countries with a group of 50 companies and 450 subsidiaries, they have very good approach to manage their employees all over the world, and ensure the personal and professional growth throw different activities arranged by the HR department of LVMH. After studying the case study there are some HR activities and operations which can be make much more influential in achieving the organizational goals and objectives. The HR department may start management courses for their middle level and primary level management team, to ensure their growth to take over the future top level management positions Employees ready for international mobility should be given proper training before they go on assignment, though LVMH provide some pre departure and post arrival training but it is needed to have a very structured training program which provide complete knowledge and information on how to work as expatriate. The process of inter-cultural training has much more potential, so the training should be extended to subsidiaries level to make a pool of employees aware of the different cultural values and available for any cross cultural assignments. LVMH needs extend their recruitment and selection process not just to those countries where the company is in operation, to global recruitment and selection in order to get a big pool of potential candidates from all over the world and then select the appropriate individuals on the basis of merit which best suit the organizational goals and strategy.

Slave Acculturation Essay -- American History

Slave Acculturation The seasoning process, as applied to the treatment of plantation slaves, was designed to ensure not only that the slaves would become totally dependent upon the dictates of their owners but also to destroy the cultural links which the slaves had with their former homelands. In the West African kingdoms which provided one of the major source of slaves at the height of the triangle trade, slavery was part of the indigenous culture; however, the motivation behind African domestic slavery was for the main part political, and intricately bound up with the way in which the capture of those from neighbouring tribes would allocate bargaining power to the captors; it was not necessary to impose a process of acculturation on the slaves in order to ensure their total obedience. (Curtin p 63) However, once slavery was extended to Europe and the Americas, there was a perception amongst the white slave-owners that to allow black slaves to maintain their cultural heritage would result in the fomentation of rebellion and invalidate the psychological and physical domination which was essential if small groups of whites were to successfully control large groups of slaves.(Inikori p 22) Depriving slaves of their physical strength, except when seen as necessary to set an example, would have been counter-productive. It was the potential for labour which was highly valued on the plantations; slaves cost money and it was in the interests of the plantation owners to maintain the physical health and strength of their slaves, even when they had established a breeding program which made the slave community essentially self-perpetuating. Seasoning was therefor... ...African heritage but developed along different cultural lines and could not be said to have a direct connection with its cultural origins in the modern context of Black American society. Bibliography Curtin, Philip D. and Paul E. Lovejoy, ed. Africans in bondage: Studies in Slavery and the Slave Trade. Madison, WI: University of Wisconsin Press, 1986. Burnard, T & Morgan, K. (2001) The dynamics of the slave market and slave purchasing patterns in Jamaica, 1655-1788. William and Mary Quarterly 58; 1: npa. Inikori, Joseph E. and Stanley L. Engerman, eds. The Atlantic Slave Trade: Effects on Economies. Societies, and Peoples in Africa, the Americas, and Europe. Durham, NC: Duke University Press, 1992. Africa in America: Slave Acculuturation and Resistance in the American South and the British Caribbean, 1736-1831., The William and Mary Quarterly.(JSTOR)

Market Structure of the German and British Tour Operators’ Industry Through the Analysis of the Package Tour Prices in the Balearic Islands. Essay

Abstract: In this paper we study a sample of package tour prices of German and British tour operators in the Balearic Islands. One of the proposes of this study is to analyse if there are significant differences in price between tour operators due to different factors than those associated to the characteristics of the offer (first hypothesis). These differences in price have been showed in Sinclair et al. (1990) by British tour operators in the resort of Malaga and in Aguilà ³ et al. (2001) by German tour operators in Majorca. The main results point out differences in price between tour operators not associated with the characteristics of the package tour’s offer, that we interpret as an oligopolistic feature of the tour operators’ market. The genereted data is also useful to estimate the role that hotel chains play. Our second hypothesis is to contrast if the association of hotels in chains offset the tour operator’s market power. Keywords: German and British tour operators’ industry; Balearic Islands; Package tour prices. INTRODUCTION The Balearic Islands could be one of the regions that best symbolised the Mediterranean sun and beach holidays. This type of tourism emerged in the 60’s and supposed a turning point in the evolution of tourism. Before this date few tourist visited the islands and all of them were of the upper class, after 1960 the middle and lower class can afford vacations due to several economical and cultural changes. One of the most important changes was the package tour made by tour operators, who due to the volume and standardisation of the packages generated economies of scale, and so, lower prices to tourist who become to arrive in mass. European consumers showed a growing tendency to this type of vacation, partly due to lower prices that, for the same final product, could offer tour operators (Travel and Tourism Intelligence, 2000). This lower price is the result of a bulk negotiation with the different elements that compose the package tour, essentially: hoteliers and airlines. In the present paper, we will focus on the negotiation with hoteliers, as the main European tour operators are vertically integrated with charter airlines. The lack of studies on hoteliers-tour operators’ price negotiation is due to the non-availability of data related to this theme. So, although we consider that empirical evidence is necessary, our last choice was to arrange several interviews with different hoteliers to know about the price negotiation with tour operators. The results of these interviews highlight that operators who contract more room’s beds are those who get lower prices. Obviously, those operators are the large ones. So, we can start from the premise that large tour operators have market power on mass destinations. The main purpose of this paper is to study prices that tour operator s fix on the package tour brochures in order to determine if they operate in a competitive or oligopolistic market. If in the origin market operates under perfect competition, tour operators could fix a marginal-cost price, on the other hand, they could fix a price above the marginal-cost without losing market share if the origin market is oligopolistic. Anyway, the existence of economies of scale in sales, marketing and purchasing, mean that there are conditions, which strongly favour concentration in the tour operator industry (Williams, 1996). Both German and British tour operators dominated the European market in 1999, as seven of the ten main tour operators are of these nationalities (FVW Europà ¤ische Veranstalter in Zahlen, documentation 1999/2000). Moreover, in each country large tour operators have large market shares: in 1999 the seven large German tour operators have a 83% market share (FVW), whilst the four main British tour operators control the 86.6% of the Spanish market (AC Nielsen). On the other hand, the Balearics attract large numbers of German and British tourist, accounting for 70% of the total of foreign tourists in 2000[ii] and as exposes Williams (1996) the destinations that are dependent on the British and German markets are in fact locked into relationships with the powerful tour operators in these countries. The first propose (hypothesis 1) of this paper is to contrast the market power of these companies when selling the Balearic Islands. By the way, the hotel chains in the Balearic Islands, as an association of hotels, can negotiate lower prices with tour operators than an individual hotel, and thus, can offset the power of tour operators in the Islands. This is the last point (hypothesis 2) that we want to analyse in the paper. Dunning and McQueen (1982) argued that there are three conditions for the emergence of international hotel chains: 1) where there are net ownership advantages; 2) where there are locational endowments; 3) to internalise market transactions. In mass tourism the authors argued that the first two conditions do not exist, as the tourism product being sold is largely indifferent to branding and location factor endowment. We do not thing that mass tourism and hotel chains may not be held concurrently, as most Balearic hotels chains have internationalise and some of them are between the most important in the world. Resuming, in this paper we will examine the German and British tour operators’ industry through the analysis of the package tour prices o n the Balearic Islands and the roll that hotel chains play. The evidence that price could give is not enough, but a gut approach to analyse the tour operators’ package tour industry. The paper is divided as follows: in the next section, we first review the literature concern to tour operators, then we describe the data used in the paper. After that, we show some descriptive results of the package tour prices, in order to identify the influence of some relevant characteristics of the package tour on its price. Then, an analysis of variance is done to evaluate the statistical significance of the variables detected as significant in determining the price of package tours; and finally some observations on the package tour industry are offered before reaching an overall conclusion. LITERATURE REVIEW There are implicit statements between those who work on the tourism sector, that tour operators dominate mass destination markets and although there are numerous assertions of the importance of tour operators, there has been little detailed research on this topic. We thought that the package tour industry analysis is still at its beginnings, despite its relevance in most of the European markets. Several researchers have discussed the structure of this industry, but the conclusions in some cases have turned out to be contradictory. Sheldon (1986) argues that the US package tour industry is polarised into a few large stable firms and many small less stable firms, and conclude that the industry is contestable. Fitch (1987) presents descriptive evidence of market power in the UK package tour industry. Baum and Mudambi (1994) argue that the UK package tour industry is oligopolistic and prone to price instability. Taylor (1996) queries whether the UK industry is contestable or oligopolisti c and concludes that the UK market is contestable. Curtin and Busby (1999) expose that due to economies of scale, tour operators have enormous buying power (monopsony) as well as considerable control of the distribution and sale of their product in the market place (monopoly power). The above papers are based in theoretical arguments. Evans and Stabler (1995) use descriptive statistics to argue that the UK industry is segmented according to strategic groupings, where the large firms are oligopolistic and the small ones are competitive. Gratton and Richards (1997) introduce some empirical evidence on package tour prices and tour operators’ market shares. They conclude that the UK package tour industry is contestable, whilst the German is a stable oligopoly. Davies and Downward (1998, 2000) use econometrics, and the results gave empirical support to the Evans and Stabler thesis of strategic groupings. Concretely, they argue that the UK package tour industry is segmented by size. On the other hand, there are some papers that study the tour operators’ industry in destination places rather than in the origin markets: Taylor (1995) analyses the package tour price competitiveness in several Mediterranean destinations and concludes that the Spanish hotels are price acceptant, and emphasises the high tour operators’ negotiation power. Sinclair et al. (1990) examine the package tour prices in Malaga and conclude that there are significant differences in prices between UK tour operators. Aguilà ³ et al. (2001) study the German package tour prices in Majorca and come to the conclusion that there are significant differences in prices, no related with the package tour characteristics. Furthermore, due to the antimonopoly legislation, some concentrations between tour operators have been analysed by The Monopolies and Mergers Commission (the British authority on mergers and concentrations) and the European Commission (the European authority on mergers and concentrations). In 1988 The Monopolies and Mergers Commission investigated the acquisition of Horizon Travel by Thomson Travel Group and reported that the British tour operators’ market was competitive. They demonstrated that with the followings facts: the price competitiveness of the market, low profitability, relatively easy entry by new firm to the tour operating industry and higher prices in Germany and other European countries. On the other hand, in 1999 the European Commission investigated and blocked the acquisition of First Choice by Airtours alluding to several features that indicated a dominant position on the British tour operators’ market. By the way, other acquisitions between tour operators of different nationalities investigated by the European Commission have been expected not to operate against the competition (Airtours/Frosch Touristik and TUI/Thomson). At this point, we consider that the European Commission do not investigated the market power that this macro European tour operators can have in a nearly future on some destinations, as the Balearic Islands, where almost 20% of the tourist are carried by Thomson and TUI, nowadays belonging to the same touristic group. THE DATA The data used in this paper is from 28 German and 20 British tour operators’ summer 2000 brochures[iii]. The brochures describe in detail the characteristics of each offer (hotel category, proximity to beaches, swimming pool, etc) and give an overall price, not giving a price to each element of the offer. Many of the characteristics described in the brochures are related to the hotel star rating[iv], regulated by law. However it should be stress that the star rating don’t constitute an exhaustive description of the hotel, so there are other characteristics that impinge on package tour prices. Concretely, we consider: zone, hotel star rating, beds in room, type of board, proximity to a population centre, picturesque surroundings, lift, child care, playground, air condition, TV, SAT, garden, entertainment, no smoking areas, swimming pool, tennis, bicycles, sports, sauna, gym, golf, room sea view, mini bar, proximity to a natural area, proximity to beaches, total rooms and floors of the hotel and exclusive to the tour operator. Tour operators’ package tour prices for the same hotel vary depending on the specific characteristic of the offer (beds in room, type of board, zone, etc) and of other facts, concretely transport cost, length and time of the year. As in Aguilà ³ et al. (2001) we consider, from the point of view of price competitiveness, the influence on prices of product’s characteristics rather than transport cost and time of year for the present analysis. Thus, the present analysis focuses on offers for a stay in one-to five-star hotels in the Balearic Islands, considering only prices for the first week of August 2000 (high season) and with departure from Dà ¼sseldorf and Gatwick. The high season was chosen because that time of the year (May-October) is when more tourists visit the Balearic Islands. Nearly the 50% of the tourist that visit the Islands concentrate in the months of June, July and August[v]. The selection of the first week of August was arbitrary. The choice of Dà ¼sseldorf was based on the fact that it moves 20.9% of the German tourist that come to the Balearic Islands; and for the British tourist, Gatwick was chosen because it canalise 29.9% of British tourist[vi]. Comparisons between nationalities are workable because a charter flight’s mean price from Gatwick or from Dà ¼sseldorf to the Balearic Islands do not present significantive differences. We really thought that our data is suitable to analyse the tour operators’ price structure in the Balearic Island. Our previous statement is based in the fact that 8921 tour operators’ offers associated with 693 hotels were analysed, while 713 hotels is the official number of re gistered hotels in the Balearic Islands. Furtehrmore, the fact that nearly 90% of hotel rooms are contracted by tour operators in the Balearic Islands allow us the inference of the results to the industry. ANALYSIS OF THE PACKAGE TOUR PRICES Our first hypothesis to contrast is if there are differences in price due to tour operators and thus, not associated with the characteristics of the offer. The second hypothesis is to analyse the role that hotel chains play in the determination of package tour prices .We first realize a descriptive analysis, to carry on with an analysis of variance. Thus, allow us to isolate the effect that tour operators and hotel chains have on prices, estimating if there are differences and the kind of differences. Descriptive analysis Tour operators The variability of the prices of the packages offered are due to several factors, some of them associated to the characteristics of the offer and some related to the tour operator that organise the package tour. To analyse our first hypothesis we have to isolate the tour operator effect by homogenising the offer. We can only compare prices between tour operators if the offers are homogenous. Hotel star rating, type of board and beds in room are expected to be, in a first approximation, the main causes of price variability. So, the offers that we consider are in a double room with half board in a three stars hotel. Figure 1 and 2 present the box-plots of the price in this market segment for each tour operator for each nationality[vii]. In figure 1, it can be seen that, Niag Reisen’s, FTI’s and Club Blaues Meer’s median price is in a range clear above the rest, while SLR and Ãâ€"ger Tours, and TUI and C&N present similar distributions. Insert Figure 1 about here In the case of British tour operators, figure 2 shows that the positions of the price distributions have a clear order: Airtours’ price distribution is above the rest, then go Thomas Cook and Virgin and finally, Cosmos, First Choice and Thomson are third in the ranking. Insert Figure 2 about here A careful reading of this information allows the inference of factors other than hotel star rating, type of board and number of beds in a room in price determination. Although other factors determining price are considered in the analysis of variance, these results point to a differential effect associated with the tour operator. Once we have highlighted the differentiation effect of tour operators, we carry on with its analysis. We don’t have to forget that tour operators are intermediaries between the hotel industry and the holiday’s consumers. Its control capacity of the market in a zone or in a demand segment could be reflected both in hotels, through a low price negotiation, and with customs, offering higher prices in the brochures. The first one, regrettably, can be estimated trough the data, but we can explain the possibilities that tour operators have when they establish the package tour price. If they have market power in destinations (we assume that large ones have) will obtain lower prices per room. At this point, in general terms, tour operators have two alternatives. First, they can establish lower prices in the brochures, so its mark-up will not benefit, but consumers; on the other hand, tour operators can raise mark-up and get beneficiated. The first choice will show market power with respect to hoteliers, whilst the second will state market power with respect to hoteliers and clients. To focus on its control capacity and its influence on prices, we have created a new variable: product concentration degree that measures the importance of each tour operators’ offer by nationalities in each market segment, according to star rating and type of board. It has been calculated as the percentage of the number of offers that each tour operator realise in each hotel star rating and in a specific type of board, regarding the total number of offers in this segment. A 10.9% value for this variable to Neckermann’s three stars hotel and half board offers, mean that the 10.9% of the package tour’s offers in three stars hotels and half board are realis e by this tour operator. A dispersion graph between this variable and the mean price by hotel star rating and type of board are shown in figure 3 for British tour operators and in figure 4 for German. Insert Figure 3 about here The dispersion graph shows a positive relation between Product concentration degree and the average price by star rating and type of board of British tour operators’ offers. The Pearson coefficient (0.384) confirms that the relation is significantive and positive. Insert Figure 4 about here The same results are obtained with German tour operators, with a Pearson coefficient of 0.293, but although the coefficient is significative and positive, the general picture is not so clear. So, the general conclusion for both nationalities is that as the Product concentration degree increases the average price by star rating and type of board is higher. Our first preliminary conclusions of this descriptive analysis of tour operators are two: 1) There are differences in price among international companies. 2) As the control of a market segment by a tour operator increases, it can fix higher prices. Hotel chains The association of hotels in chains is seen, among other factors, as an intention to offset the European tour operators’ growing market power (Bardolet, 1990, p.228; Doxa, 1988). Regarding to hotels chains and its capacity to offset the tour operators’ market power, we have created a dummy variable with further information called agreement with ttoo which takes three categories: 1) the hotel doesn’t belong to a hotel chain, 2) the hotel belongs to a hotel chain and it have some kind of agreement with tour operators and 3) the hotel belongs to a hotel chain and it have any agreement with tour operators. Once we have obtained the dummy, we have calculated the mean difference between each category for offers in a double room with half board in a three stars hotels. We expect to observe that offers in hotels that belong to hotel chains are more expensive than those related to offers in hotels that don’t belong to hotel chains, as they are able to negotiate higher prices with tour operators and thus, tour operators charge this higher prices to consumer. Nevertheless, the brochure price analysis reflect diff erent results, as are showed in the following tables: Table 1: Mean price for German package tours |Mean price |No chain |Chain without agreement |Chain with agreement | | |(92985) |(93257) |(90827) | |No chain | |-272 |2157 | | | |(0.7) |(0.254) | |Chain without agreement | | |2430 | | | | |(0.06) | Table 2: Mean price for British package tours |Mean price |No chain |Chain without agreement |Chain with agreement | | |(149896) |(148909) |(139707) | |No chain | |986 |10189 | | | |(0.7) |(0.03) | |Chain without agreement | | |9202 | | | | |(0.01) | Tables 1 and 2 show the mean price for each category in brakets, the difference mean prices between categories and its significance in brakets. The results are very explicit and present the same pattern in both nationalities, offers in hotels that belongs to hotel chains with agreements with tour operators have lower average prices than those that don’t have agreements or don’t belong to hotel chains. The results are significantive for British offers, however, for German offers, while the price average difference between hotels with or without agreements is on the limit of the 5% significance, the price average difference between hotel with agreements and those that don’t belong to a hotel chain is not significantive. On the other hand, there are non significantive average price differences between hotels that don’t belong to hotel chains and those that belong to one without agreements. The obtained results can be interpreted as follow: hotel chains that h ave any kind of agreement with tour operators are more concerned in obtaining higher occupancy rates than higher prices, that can mean lower occupancy rates. Thus, if offers are cheaper in those hotels, they could have higher occupancy rates. Supporting our thesis, Dunning and McQueen (1982, p. 86) explained that: â€Å"hotels associated with tour operators will also presumably be able to plan and maintain higher occupancy rates because the parent company is in a control position in channelling tourist towards its own hotel.† The conclusions obtained with this descriptive analysis of the hotel chains were at a first glance unexpected, but relevant as the package tour prices fixed in the brochures, reveal that what involve negotiation power is not the hotel chains per se, but the association with tour operators. Analysis of variance The analysis of variance will allow us to compare the importance that different characteristics of the offer have on the overall price, as well as differential effects linked to the tour operator and hotel chains. The first one was detected in preliminary works as Sinclair et al. (1990) and Aguilà ³ et al. (2001), while the second one is a new attribution to this field. Its seems appropriate to consider, given the previous results, as determinants of the package tour price the hotel star rating, the type of board and the number of beds in the room. Although the main characteristics of the package tour are covered by this variables, the brochures specify in detailed each offer and this information is available in our data to improve the analysis. Some of this can be superfluous, in terms of its relationship to the category of the hotel or its redundancy. This is the case, for example, with a characteristic such as a satellite TV and TV in rooms or child care and playground. Nevertheless, descriptive analyses also state that the tour operator, the variable product concentration degree and the variable agreement with ttoo have so mething to say about the final price of a package tour. With this specification, the signification of tour operator can’t be put down to characteristics of the offer not completely covered by the hotel star rating. The variable used to analyse the differences was the price of the package tour specified in the brochure. Table 3 for British and in table 4 for German show the results of an analysis of variance of the variables that turn out to be significant. Table 3: Analysis of variance of the variable price of British package tour. |Dependent Variable: price | | | | |Source |DF |F-ratio |Pr>F | | | | | | |Model |44 |281.67 |0.000 | |Residual |2297 | | | |Total |2341 | | | | | |R square=0.841 | | | | | | |Variables |DF |F-ratio |Pr>F | | | | | | |Intercept |1 |5157.82 |0.000 | |Beds in room |2 |291.38 |0.000 | |Hotel star rating |4 |210.05 |0.000 | |Type of board |3 |118.78 |0.000 | |Tour operator |14 |89.09 |0.000 | |Zone |10 |35.64 |0.000 | |Product concentration degree |1 |20.61 |0.000 | |Number of floors |1 |8.79 |0.003 | |Room sea view |1 |21.98 |0.000 | |Mini bar |1 |102.02 |0.000 | |Air condition |1 |19.67 |0.000 | |Playground |1 |15.66 |0.000 | |Picturesque surroundings |1 |258.13 |0.000 | |Proximity to a natural area |1 |44.20 |0.000 | |Swimming pool |1 |37.23 |0.000 | |Sauna |1 |64.95 |0.000 | |Golf |1 |18.98 |0.000 | Table 4: Analysis of variance of the variable price of German package tour. |Dependent Variable: price | | | | |Source |DF |F-ratio |Pr>F | | | | | | |Model |58 |323.94 |0.000 | |Residual |6467 | | | |Total |6525 | | | | | |R square=0.742 | | | | | | |Variables |DF |F-ratio |Pr>F | | | | | | |Interseccià ³n |1 |5892.90 |0.000 | |Beds in room |3 |418.40 |0.000 | |Hotel star rating |4 |991.06 |0.000 | |Type of board |3 |79.31 |0.000 | |Tour operator |22 |21.89 |0.000 | |Zone |14 |42.70 |0.000 | |Product concentration degree |1 |100.21 |0.000 | |Agreement with ttoo |2 |6.57 |0.001 | |Number of floors |1 |30.51 |0.000 | |Room sea view |1 |187.33 |0.000 | |Air condition |1 |10.82 |0.001 | |Mini bar |1 |78.96 |0.000 | |Sat |1 |51.88 |0.000 | |Playground |1 |55.09 |0.000 | |No smoking areas |1 |9.26 |0.002 | |Proximity to a natural area |1 |71.38 |0.000 | |Swimming pool |1 |5.40 |0.020 | As can be observed in the above tables the variable agreement with ttoo appears only significantive for German package tours. However, the variable product concentration degree appears significantive and positive for both nationalities. This result show that the great control of a market segment by a tour operator in the Balearic Islands allow it to exert a great market power fixing higher prices and thus, reveal the oligopolistic features of this market. The identity of tour operator appears for both nationalities significantive. Aguilà ³ et al. (2001) explained this results in two ways. First, it is possible that there are characteristics not observable in brochures, which would be associated with the level of quality of the services offered by the tour operator. The second explanation points to the monopolistic nature of competition in this type of market. Sinclair et al. (1990) attribute the differences in price to the greater effectiveness of certain advertising campaigns or th e inability of smaller companies to take advantage of the economies of scale that the large ones enjoy. The first explanation of Aguilà ³ et al. (2001) refers to variables as flight schedules, degree of attention, and so on. In our sample this factors has been taken into account. So, the rest of explanations given by authors to this fact reveal, in a wide range, an oligopolistic feature of this market, especially among large tour operators, that permit them to have different strategies one another. Obviously the specific strategy of each tour operator is unknown, but the analysis of the parameters estimated (table 5) offer us an overall strategy, that has been contrasted by the companies portfolios. Table 5: Tour operators estimated parameters |Phoenix |-10370 |Thomson |-21473 | |LTU |-6340 |First Choice |-14170 | |ITS |-5504 |Cosmos |-11381 | |Alltours |-5196 |Thomas Cook |-4879 | |Dertour |-5193 |Virgin |0 | |C&N |-2571 |Airtous |18065 | |SLR |-334 | | | |TUI |0 | | | |Club Blaues Meer |1166 | | | |Frosch Touristik |5070 | | | |Niag Reisen |6346 | | | |Ãâ€"ger Tours |9518 | | | German data is richer in terms of size of tour operators than British data, and so, we can observe large tour operators: TUI, C&N and LTU; medium: Dertour, FTI and ITS; and small: Alltours, Club Blaues Meer, Niag, Ãâ€"ger, Phoenix and SLR. However, British data is composed by large tour operators: Thomson, Airtours, Thomas Cook and First Choice; and medium: Cosmos and Virgin. Although the mark up of each package tour sold is not so high, the total number of packages sold determine its benefits. Therefore, rather than benefits, market shares are the objective of tour operators. Generally speaking, small German tour operators fix higher prices, except Phoenix and Alltours. This fact is due to its lower capacity of negotiating prices with the supply side, and the relative exclusive distribution system created by large tour operators. When the tour operator is unable to reduce its costs due to its size, must fix higher prices and have lower market share. By the way, TUI is the German an d European tour operator with great market share and is, among large tour operators, the one that fix the highest prices. Its growing strategy through expanding in other markets, allow TUI to increase its market share without reducing prices. That is, TUI can fix higher prices without losing market share. The rest two large tour operators: C&N and LTU fix prices lower than TUI. C&N could follow a lower prices strategy to rise its market share and challenge TUI leadership. On the other hand, LTU has been acquired by REWE in January 2001, so the low prices in summer 2000 can be interpreted as an attempt to gain clients and rise its market share (LTU has reduce its market share dramatically from 1994 to 1999). Finally, we have the medium tour operators: Dertour, ITS and FTI. The first two fix lower prices in an attempt to rise its market share. Medium tour operators don’t have the great negotiation power that large ones have, and so, don’t obtain low prices in the negotiation with the supply side, but if they want to become large they have to obtain clients and then fix in the brochures low prices. The last one, FTI, has during the last years internal problems that conduce to its acquisition by Airtours. This problems can be associated with the high price fix in summer 2000. Alltours, despite its classification as a small tour operator, is among the small ones, the one that have the greatest market share, and we can put its strategy on an equal foot with ITS and Dert our. On the other hand, Airtours is among large British tour operators the one that fix the highest prices. This tour operator is the second in terms of market share both in the British and in the European market. Just like TUI, Airtours has grown through the expansion to other countries and the product diversification. This two facts allow Airtours to fix higher prices without losing market share. Although, Airtours is not the market leader in Great Britain (place hold by Thomson), it behave as it was. The acquisition of Thomson by TUI in 2000 due to financial problems can explain the low prices of the British leader. To sum up, except the small tour operators, the three tourist groups that control the European market fix the highest prices. So, although they have market power with the supply side and obtain the lowest prices in the negotiation, these prices are not diverted into low package tour prices. Therefore, large tour operators have market power both in origin an in the Bal earic Islands. We can reflect our thesis with a more general model that show the implications of the price elasticity on mark up. The theory stars with the premise that profit maximizing firms with market power set price (P) as a mark up over marginal cost (MC), which mark up depends on the elasticity of demand ((), where ( is defined to be positive. Thus: [pic] At this point, we consider that the introduction of an aggregate measure of the competitive conduct in the tour operator industry is a great deal (See Papatheodorou, 2001), but we go further arguing that tour operators perform in two related but different scenarios: destination and origin countries. In the Balearics Islands tour operators are the demand side and the hoteliers are the supply side. Tour operators are price sensitive, so its demand is quite elastic, and thus the hoteliers’ mark up is lower. So, hoteliers are concerned in occupancy rates. On the other hand, in the origin countries: Germany and UK, tour operators are the agents that supply the package tour to the consumers, so they operate as the supply side and the consumers are the demand side. Consumers behave in to different ways when decide where to expend their holidays: 1) Type 1 consumers don’t have any special destination to go and will go to the cheapest one. 2) Type 2 consumers want to go to the B alearics. Type 1 consumers are very price sensitive, its demand is elastic and so, tour operators’ mark up will be lower; contrary, type 2 consumers are less sensitive to price, so tour operators’ mark up rises. This second type of consumers are more attractive both for tour operators and hoteliers; the first ones can rise its mark up, whilst the second ones obtain a loyal tourism. Although, the mass market tour operators’ industry as a whole is characterised by small margins, this differentiation between consumers highlights the impact of loyal consumers on margins and question the statement that tour operators put destination-based business (above all hoteliers) at a bargaining disadvantage because they have obtained the initiative in persuading their clients which destination to visit.  ¿Which type of tourism have the Balearic Islands? Cladera (2002) shows that both German and British tourists repeat its holidays in the Balearic Islands (67.65% and 78.11% r espectively in 2000). This figures point out that the Islands are a destination that tourists claim and can drive us to tell that the Islands have a type 2 consumers, but we can be in front of a type 1 consumer if the reason of visiting the Balearics is the price, so we have to carry on investigating the reasons for the visits. Aguilà ³ et al. (2002) observe that the main reasons for choosing the Balearics as their holidays destination for German tourist are: clime (20% of answers), beaches (15.9%), environment and hotel quality (13.4%), transfer facilities (7.4%) and price (6.7%). British tourist give more importance to price (11% of answers), but the most relevant reason is still the clime (21.2%). Environment and hotel quality represent 12.1% of answers, whilst beaches are only a 10%. This figures can be observed by another perspective, specifically, by the number of people who have marked each of the reasons. Doing that we can observe that clime is the main reason, marked by 80.2% of Germans and 84.6% of British. While the 63.6% of Germans showed beaches as a coming reason, only a 40% of British consider beaches as a reason. Price is influent in the decision for only the 26.9% of Germans, while British are more concern about prices, 45.3%. Environment and hotel quality is marked by 53.9% of Germans and by 48.3% of British. Transfer facilities (29.7%) and night atmosphere (22.5%) is more important for Germans than for British people (12.6% and 15.5% respectively). Furthermore, Cladera (2002) analyses the number of tourist who have selected the price as a rea son for choosing the Balearics differentiating by first-time tourists and loyal ones. Cladera conclude that the 34.6% of first-time German tourists and the 45.5% of first-time British tourists consider the price one of the reasons of visiting the Islands, whilst only a 20.2% of loyal German tourist and the 43.1% of loyal British tourist. This figures show the relative less importance of price as a reason of spending the holidays in the Balearic Islands as much the Islands are visited. After this analysis we are able to answer the question: tourist who visit the Islands are mostly loyal tourists and the main reason for choosing the Islands is not the price, although British people are more sensitive to prices than German people. CONCLUSIONS This paper has had two main objectives: 1) Examine the influence on the package tour prices of the identity of the tour operator. 2) Determine the role that hotel chains play on the determination of the prices. These have been studied through the price structure of tourist packages in the Balearic Islands offered by a representative sample of German and British tour operators. The conclusions reach after the analysis permit us to state in connection with hypothesis 1 that: 1) the differences in price between tour operators are due to the different strategies that tour operators follow to gain market share, 2) large tour operators have market power both in origins and in the Balearic Islands and 3) The type of tourist who visit the Island succeed in increasing mark up both to tour operators and hoteliers. We really believe that large European tour operators have market power both in origin and in destination markets, although the strategies of each tourist group can make the market seem competitive. Debbage (1990) also consider this when argued that the suppliers are potentially able to reap the advantages of their oligopolistic and oligopsonistic power to the detriment of consumers and destinations. Relative to hypothesis 2 we can conclude that the fact that a hotel belongs or not to a hotel chain is not appreciared by fixing higher prices in the brochures, that could show a great negotiation power towards tour operator. However, the obtained results reveal that offers in hotels that have any kind of agreement with the tour operator are in mean cheaper. That results permit us to conclude that hotel chains are more concerned in high occupancy rates than in high prices per room. It could be interesting in future research to complement or contrast the methodology used here with alternative approaches to confirm the results reported in this paper. ANNEX Figure 1: Package tour prices for offers in a double room with half board in a three stars hotel by German tour operators Figure 2: Package tour price for offers in a double room with half board in a three stars hotel by British tour operators Figure 3: British tour operators’ dispersion graph by star rating and type of board Figure 4: German tour operators’ dispersion graph by star rating and type of board BIBLIOGRAPHY AGUILÓ, P.M, J. ALEGRE y A. RIERA (2001) â€Å"Determinants of the Price of German Tourist Packages on the island of Mallorca†. Tourism Economics, vol.7, issue 1, pp.59-74. BARDOLET, E. (1990) â€Å"Demanda Turà ­stica y Marketing Turà ­stico†. Papeles de Economà ­a Espaà ±ola, vol. Baleares, pp. 219-230. BAUM, T. y R. MUDAMBI (1994) â€Å"A Ricardian analysis of the fully inclusive Tour Industry†. The Services Industries Journal, vol.14, n º1, pp. 85-93. CLADERA (2002) â€Å"Anà ¡lisis de la evolucià ³n temporal de las caracterà ­sticas del turismo y del gasto turà ­stico en las Islas Baleares a partir de la Encuesta de Gasto Turà ­stico (1989-2000)†. MIMEO. CURTIN, S y G. BUSBY (1999) â€Å"Sustainable Destination Development: the Tour Operator Perspective†. International Journal of Tourism Research, vol. 1, pp.135-147. DAVIES, B. y P. DOWNWARD (1998) â€Å"Competition and Contestability in the U.K. Package Tour Industry: some Empi rical Observations†. Working Paper 98.3. DAVIES, B. y P. DOWNWARD (2000) â€Å"Industrial Organization and Competition in the UK Tour Operator/Travel Agency Business, 1989-93: an Econometric Investigation†. Working Paper n º 2000.3. DEBBAGE, K. G. (1990) â€Å"Oligopoly and the Resort Cycle in the Bahamas†. Annals of Tourism Research, vol.17, pp. 513-527. DOXA Y SUBDIRECCIÓN GENERAL DE PLANIFICACIÓN Y PROSPECTIVA TURà STICA (1989) â€Å"Concentracià ³n y Asociacionismo Empresarial en el Sector Turà ­stico. Documento de Sintesis†. Estudios Turà ­sticos, vol.103, n º9, pp. 3-33. DUNNING, J. H. y McQUEEN, M. (1982) â€Å"Multinational Corporations in the International Hotel Industry†. Annals of Tourism Research, vol.9, pp. 69-90. EVANS, N.G. y M.J. STABLER (1995) â€Å"A Future for the Package Tour Operator in the 21st century?†. Tourism Economics, vol.1, 3, pp. 245-263. FITCH, A. (1987) â€Å"Tour Operators in the UK. Survey of the Industry, its markets and product diversification†. Travel and Tourism Analyst, March, pp. 29-43. FVW (anual) â€Å"Europà ¤ische Veranstalter in Zahlen, dokumentation 1993-2000†. GRATTON, C. y G. RICHARDS (1997) â€Å"Structural change in the European Package Tour Industry: UK/German comparisons†. Tourism Economics, vol.3, 3, pp. 213-226. PAPATHEODOROU, A. (2001) â€Å"Why People Travel to different places†. Annals of Tourism Research, vol. 28, n º 1, pp. 164-179. SHELDON, P.J. (1986) â€Å"The Tour Opera tor Industry. An Analysis†. Annals of Tourism Research, vol.13, pp. 349-365. SINCLAIR, M.T., A. CLEWER y A. PACK (1990) â€Å"Hedonic prices and the Marketing of Package Holidays: the case of Tourism resorts in Malaga†. In Marketing Tourism Places. Ashworth, G.J. and Goodall, B., eds, pp. 85-103. London: Routledge. TAYLOR, P. (1995) â€Å"Measuring Changes in the Relative Competitiveness of Package Tour Destinations†. Tourism Economics, vol.1, 2, pp. 169-182. TAYLOR, P. (1996) â€Å"Oligopoly or Contestable Markets in the UK Package Tour Industry?†. The Service Industries Journal, vol. 16, pp. 379-388. TRAVEL AND TOURISM INTELLIGENCE (2000) â€Å"The European Leisure Travel Industry†. London: Travel and Tourism Intelligence. WILLIAMS, A.M. (1996) â€Å"Mass Tourism and International Tour Companies†. In Tourism in Spain-Critical Issues. Barke,M. , Tonner,J. and Newton,M.T.,eds, pp. 119-135. Wallingford: CAB International. ———————– END NOTES [i] Los tres profesores son miembros del Departament d’Economia i Empresa de la Universitat de les Illes Balears. [ii] Govern de les Illes Balears (2000) â€Å"El turisme a les Illes Balears, dades informatives, any 2000†. [iii] Terramar, Spanien und Portugal; Neckermann, Young and Sport; Neckermann, Flugreisen; Neckermann, Family; Condor Individuell; Air Marin, Spanien und Portugal; Fischer Reisen, Flugreisen; Kreutzer; Bucher Reisen; Smile anf Fly; Jahn Reisen; Maris Reisen; THR Tours, Jet and Bett; THR Tours, Urlaub Mal Anders; Tjaerborg; FTI; FTI, Preis Pardise; ITS, Spanien und Portugal; DER, Der Sonnenseiten; Alltours, Flugreisen; 1,2 Fly; TUI Schà ¶nen Ferien; TUI Schà ¶nen Ferien Free World; Ãâ€"ger Tours,Sommer 2000; Club Blaues Meer Reisen, Mallorca; Shauinseland Reisen, Belearen; Niag Reisen, Mallorca; Phoenix, Flugreisen Sommer 2000; Airtours, Summer Sun; Archers Direct, Summer Sun; Price Beaters; Cosmos, Summer Sun; JMC, Summer Sun; JMC, Select; JMC, Ess entials; Club 18-30; Skytours; Thomson, Summer Sun; Thomson, Small and Friendly; Thomson a la Carte; Club Freestyle; Portland Direct; Just; Virgin, Summer Sun; Sovereign, Summer Sun; First Choice, Summer Sun; Eclipse, Summer Sun; 2wentys. [iv] Sinclair et al (1990) point out that hotel rating is a gut indicator of the services and facilities that the hotel offers. [v] Conselleria de Turisme (2000) [vi] Govern de les Illes Balears (1999) â€Å"El turisme a les Illes Balears, dades informatives, any 1999†. [vii] In each of the boxes, the central line indicates the median of the distribution, while the height of the box represents the inter-quartile range, the area is proportional to the frequency of observations. The feet extend (at most) up to 1.5 times the inter-quartile range, aiding the detection of observed extremes (marked as circles).

Early Inventors and Innovators of Electricity

The history of electricity begins with William Gilbert (1544–1603), a physician and natural scientist who served Queen Elizabeth the first of England. Before Gilbert, all that was known about electricity and magnetism was that a lodestone (magnetite) possessed magnetic properties and that rubbing amber and jet would attract bits of various materials to start sticking. In 1600, Gilbert published his treatise De magnete, Magneticisique Corporibus (On the Magnet). Printed in scholarly Latin, the book explained years of Gilberts research and experiments on electricity and magnetism. Gilbert raised the interest in the new science greatly. It was Gilbert who coined the expression electrica in his famous book. Early Inventors Inspired and educated by Gilbert, several Europeans inventors, including Otto von Guericke (1602–1686) of Germany, Charles Francois Du Fay (1698–1739) of France, and Stephen Gray (1666–1736) of England expanded the knowledge. Otto von Guericke was the first to prove that a vacuum could exist. Creating a vacuum was essential for all kinds of further research into electronics. In 1660, von Guericke invented the machine that produced static electricity; this was the first electric generator. In 1729, Stephen Gray discovered the principle of the conduction of electricity and, in 1733, Charles Francois du Fay discovered that electricity comes in two forms which he called resinous (-) and vitreous (), now called negative and positive. The Leyden Jar The Leyden jar was the original capacitor, a device that stores and releases an electrical charge. (At that time electricity was considered the mysterious fluid or force.) The Leyden jar was invented in 1745 nearly simultaneously in Holland by academic Pieter van Musschenbroek (1692–1761) In 1745 and in Germany by German clergyman and scientist, Ewald Christian Von Kleist (1715–1759). When Von Kleist first touched his Leyden jar he received a powerful shock that knocked him to the floor. The Leyden jar was named after Musschenbroeks hometown and university Leyden, by the French scientist and cleric Jean-Antoine Nollet (1700–1770). The jar was also called the Kleistian jar after Von Kleist, but this name did not stick. Ben Franklin, Henry Cavendish, and Luigi Galvani U.S. founding father Ben Franklins (1705–1790) important discovery was that electricity and lightning were one and the same. Franklins lightning rod was the first practical application of electricity. atural philosopher Henry Cavendish of England, Coulomb of France, and Luigi Galvani of Italy made scientific contributions towards finding practical uses for electricity. In 1747, British philosopher Henry Cavendish (1731–1810) started measuring the conductivity (the ability to carry an electrical current) of different materials and published his results. French military engineer Charles-Augustin de Coulomb (1736–1806) discovered in 1779 what would later be named Coulombs Law, which described the electrostatic force of attraction and repulsion. And in 1786, Italian physician Luigi Galvani (1737–1798) demonstrated what we now understand to be the electrical basis of nerve impulses. Galvani famously made frog muscles twitch by jolting them with a spark from an electrostatic machine. Following the work of Cavendish and Galvani came a group of important scientists and inventors, including Alessandro Volta (1745–1827) of Italy, Danish physicist Hans Christian Ørsted (1777–1851), French physicist Andre-Marie Ampere (1775–1836), Georg Ohm (1789–1854) of Germany, Michael Faraday (1791–1867) of England, and Joseph Henry (1797–1878) of the U.S. Work With Magnets Joseph Henry was a researcher in the field of electricity whose work inspired many inventors. Henrys first discovery was that the power of a magnet could be immensely strengthened by winding it with insulated wire. He was the first person to make a magnet that could lift 3,500 pounds of weight. Henry showed the difference between quantity magnets composed of short lengths of wire connected in parallel and excited by a few large cells, and intensity magnets wound with a single long wire and excited by a battery composed of cells in series. This was an original discovery, greatly increasing both the immediate usefulness of the magnet and its possibilities for future experiments. The Oriental Impostor Suspended Michael Faraday,  William Sturgeon (1783–1850), and other inventors were quick to recognize the value of Henrys discoveries. Sturgeon magnanimously said, Professor Joseph Henry has been enabled to produce a magnetic force which totally eclipses every other in the whole annals of  magnetism, and  no parallel is to be found since the miraculous suspension of the celebrated Oriental impostor in his iron coffin. That commonly used phrase is a reference to an obscure story bantered about by these European scientists about Muhammad (571–632 CE), the founder of Islam. That tale was not about Muhammad  at all, in fact, but rather a tale told by Pliny the Elder (23–70 CE) about a coffin in Alexandria, Egypt. According to Pliny, the Temple of Serapis in Alexandria had been built with powerful lodestones, so powerful that the iron coffin of Cleopatras younger sister Arsinoà « IV (68–41 BCE) was said to have been suspended in the air. Joseph Henry also discovered the phenomena of  self-induction  and mutual induction. In his experiment, a current sent through a wire in the second story of the building induced currents through a similar wire in the cellar two floors below. Telegraph The telegraph was an early invention that communicated messages at a distance over a wire using electricity that was later replaced by the telephone. The word telegraphy comes from the Greek words  tele  which means far away and  grapho  which means write. The first attempts to send signals by electricity (telegraph) had been made many times before  Henry  became interested in the problem.  William Sturgeons  invention of the electromagnet encouraged researchers in England to experiment with the electromagnet. The experiments failed and only produced a current  that weakened after a few hundred feet. The Basis for the Electric Telegraph However, Henry strung a mile of fine wire, placed an intensity  battery  at one end, and made the armature strike a bell at the other. In this experiment, Joseph Henry discovered the essential mechanics behind the electric telegraph. This discovery was made in 1831, a full year before  Samuel Morse  (1791–1872) invented the telegraph. There is no controversy as to who invented the first telegraph machine. That was Morses achievement, but the discovery which motivated and allowed Morse to invent the telegraph was Joseph Henrys achievement. In Henrys own words: This was the first discovery of the fact that a galvanic current could be transmitted to a great distance with so little a diminution of force as to produce mechanical effects, and of the means by which the transmission could be accomplished. I saw that the electric telegraph was now practicable. I had not in mind any particular form of telegraph, but referred only to the general fact that it was now demonstrated that a galvanic current could be transmitted to great distances, with sufficient power to produce mechanical effects adequate to the desired object. Magnetic Engine Henry next turned to designing a magnetic engine and succeeded in making a reciprocating bar motor, on which he installed the first automatic pole changer, or commutator, ever used with an electric battery. He did not succeed in producing direct rotary motion. His bar oscillated like the walking beam of a steamboat. Electric Cars Thomas Davenport (1802–1851), a blacksmith from Brandon, Vermont, built a road-worthy  electric car  in 1835. Twelve years later U.S. electrical engineer Moses Farmer (1820–1893) exhibited an electric-driven locomotive. In 1851, Massachusetts inventor Charles Grafton Page (1712–1868) drove an electric car on the tracks of the Baltimore and Ohio Railroad, from Washington to Bladensburg, at the rate of nineteen miles an hour. However, the cost of batteries was too great at the time and the use of the electric motor in transportation not yet practical. Electric Generators The principle behind the dynamo or electric generator was discovered by  Michael Faraday  and  Joseph Henry  but the process of its development into a practical power generator consumed many years. Without a dynamo for the generation of power, the development of the electric motor was at a standstill, and electricity could not be widely used for transportation, manufacturing, or lighting like it is used for today. Street Lights   The arc light as a practical illuminating device was invented in 1878 by Ohio engineer Charles Brush (1849–1929). Others had attacked the problem of electric lighting, but a lack of suitable carbons stood in the way of their success. Brush made several lamps light in series from one dynamo. The first Brush lights were used for street illumination in Cleveland, Ohio. Other inventors improved the arc light, but there were drawbacks. For outdoor lighting and for large halls arc lights worked well, but arc lights could not be used in small rooms. Besides, they were in series, that is, the current passed through every lamp in turn, and an accident to one threw the whole series out of action. The whole problem of indoor lighting was to be solved by one of Americas most famous inventors: Thomas Alva Edison (1847–1931). Thomas Edison Stock Ticker The first of Edisons multitudinous inventions with electricity was an automatic vote recorder, for which he received a patent in 1868, but was unable to arouse any interest in the device. Then he invented a stock ticker, and started a ticker service in Boston with 30 or 40 subscribers and operated from a room over the Gold Exchange. This machine Edison attempted to sell in New York, but he returned to Boston without having succeeded. He then invented a duplex telegraph by which two messages might be sent simultaneously, but at a  test, the machine failed because of the stupidity of the assistant. In 1869, Edison was on the spot when the telegraph failed at the Gold Indicator Company, a concern furnishing Stock Exchange gold prices to its subscribers. That led to his appointment as superintendent, but when a change in the ownership of the company threw him out of the position he formed, with  Franklin L. Pope, the partnership of Pope, Edison, and Company, the first firm of electrical engineers in the United States. Improved Stock Ticker, Lamps, and Dynamos Not long afterward Thomas Edison released the invention which started him on the road to success. This was the improved stock ticker, and the Gold and Stock Telegraph Company paid him $40,000 for it. Thomas Edison immediately set up a shop in Newark. He improved the system of automatic telegraphy that was in use at that time and introduced it into England. He experimented with submarine cables and worked out a system of quadruplex telegraphy by which one wire was made to do the work of four. These two inventions were bought by  Jay Gould, owner of the Atlantic and Pacific Telegraph Company. Gould paid $30,000  for the quadruplex system but refused to pay for the automatic telegraph. Gould had bought the Western Union, his only competition. When Gould got the Western Union, said Edison, I knew no further progress in telegraphy was possible, and I went into other lines. Menlo Park Edison resumed his work for the Western Union Telegraph Company, where he invented a carbon transmitter and sold it to the Western Union for $100,000. On the strength of that, Edison set up laboratories and factories at  Menlo Park, New Jersey, in 1876, and it was there that he invented the  phonograph, patented in 1878, and began a series of experiments which produced his  incandescent lamp. Thomas Edison was dedicated to producing an  electric lamp for indoor use. His first research was for a durable filament which would burn in a vacuum. A series of experiments with a platinum wire and various refractory metals had unsatisfactory results, as did many other substances, including human hair. Edison concluded that carbon of some sort was the solution rather than a metal—English inventor Joseph Swan (1828–1914), had came to the same conclusion in 1850. In October 1879, after fourteen months of hard work and the expenditure of $40,000, a carbonized cotton thread sealed in one of Edisons globes was tested and lasted forty hours. If it will burn forty hours now, said Edison, I know I can make it burn a hundred. And so he did. A better filament was needed. Edison found it in carbonized strips of bamboo. Edison Dynamo Edison also developed his own type of  dynamo, the largest ever made up to that time. Along with the Edison incandescent lamps, it was one of the wonders of the Paris Electrical Exposition of 1881. Installation in Europe and America of plants for electrical service soon followed. Edisons first great central station, supplying power for three thousand lamps, was erected at Holborn Viaduct, London, in 1882, and in September of that year the Pearl Street Station in New York City, the first central station in America, was put into operation. Sources and Further Reading Beauchamp, Kenneth G. History of Telegraphy. Stevenage UK: Institute of Engineering and Technology, 2001.Brittain, J.E. Turning Points in American Electrical History. New York: Institute of Electrical and Electronics Engineers Press, 1977.  Klein, Maury. The Power Makers: Steam, Electricity, and the Men Who Invented Modern America. New York: Bloomsbury Press, 2008.  Shectman, Jonathan. Groundbreaking Scientific Experiments, Inventions, and Discoveries of the 18th Century. Greenwood Press, 2003.